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It is not uncommon to see companies perform well in the years after insiders buy shares. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in The Community Financial Corporation (NASDAQ:TCFC).
What Is Insider Buying?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock on the market. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At Community Financial
Over the last year, we can see that the biggest insider sale was by the Chairman of the Board, Michael Middleton, for US$333k worth of shares, at about US$30.24 per share. So it's clear an insider wanted to take some cash off the table, even below the current price of US$33.77. We generally consider it a negative if insiders have been selling on market, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. We note that the biggest single sale was only 4.2% of Michael Middleton's holding.
Over the last year, we can see that insiders have bought 2200 shares worth US$74k. On the other hand they divested 30002 shares, for US$908k. In total, Community Financial insiders sold more than they bought over the last year. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Community Financial Have Sold Stock Recently
Over the last three months, we've seen notably more insider selling, than insider buying, at Community Financial. In total, James Di Misa sold US$124k worth of shares in that time. Meanwhile Director John Parlett bought US$3.0k worth. Because the selling vastly outweighs the buying, we'd say this is a somewhat bearish sign.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. Insiders own 10% of Community Financial shares, worth about US$19m. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.
So What Does This Data Suggest About Community Financial Insiders?
The insider sales have outweighed the insider buying, at Community Financial, in the last three months. Despite some insider buying, the longer term picture doesn't make us feel much more positive. On the plus side, Community Financial makes money, and is growing profits. While insiders do own shares, they don't own a heap, and they have been selling. We'd think twice before buying! Of course, the future is what matters most. So if you are interested in Community Financial, you should check out this free report on analyst forecasts for the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.